By Wijesinghe Jinasena S. KARUNARATNE*
Sri Lanka and Canada have enjoyed a long and fruitful association particularly in the field of development cooperation since the 1950s.This association has now developed into a partnership with Sri Lanka being identified as one of Canada’s 25 development partner countries for assistance under its bilateral aid program. From the time of launching of the Colombo Plan in the year 1951 to support the newly independent members of the Commonwealth, Canada was actively involved in extending development assistance to Sri Lanka in many fields of economic activity. During the early period of the development co-operation partnership, Canada supported Sri Lanka in the construction of several large infrastructure projects such as the Colombo International Airport, Uma Oya Dam, engineering studies of the Mahaveli River Basin and the extension of the Gal Oya transmission lines.
Consequent to a shift of priorities of Canadian development assistance in the early 1990s,the Canadian InternationalDevelopment Agency(CIDA) became the principal agency for implementing Canada’s aid program with focus on economic well-being, especially for youth and disadvantaged groups, providing humanitarian assistance, supporting good governance and local capacity building, promoting human rights and gender equality, strengthening democracy and assisting in the resolution of the ongoing conflict in the country. Sri Lanka faced an unprecedented socio-economic crisis due to the devastation caused by the Tsunami tidal waves of December 2004.
Canada responded to this human tragedy by extending generous financial and material support and assistance to give immediate relief to disaster victims and conduct emergency rescue operations. The Govt. of Canada also launched ‘a dollar to dollar matching program’ to complement the efforts of the non-govt. organizations in the relief effort. The CIDA also created the Sri Lanka Tsunami Reconstruction Strategy to guide its assistance for Sri Lanka’s reconstruction efforts to the year 2009.Projects launched under this program are being implemented in collaboration with a wide range of partners in Canada and overseas. At the present time there are around 21 ongoing CIDA assisted projects in Sri Lanka. In 2004-2005 Canada’s official development assistance to Sri Lanka totaled C$ 56 million. DIPLOMATIC RELATIONS Diplomatic relations between Sri Lanka and Canada are now more than five decades old. After being administered as Consulate of Ceylon’s Embassy in Washington D.C. for many years, a Ceylon High Commission was opened in Ottawa in 1958. Both Canada and Sri Lanka are members of the Commonwealth sharing common values of commitment to democracy, good governance, rule of law, protection of human rights .Both countries share a parliamentary system of government.
Sri Lanka is a multi -cultural,multi-lingual and multi-religious country firmly committed to a pluralistic political order. Similar to the Charter of Rights in Canada, the fundamental rights of citizens are enshrined in the Constitution of Sri Lanka. Based on these common values Sri Lanka and Canada continue to maintain very friendly relations and a co-operative partnership for the mutual benefit of peoples of both countries. An important aspect of Sri Lanka’s diplomacy in Canada is the strengthening of this partnership with a view to promoting investments, economic exchanges and trade relations between the two countries. BILATERAL TRADE AND FOREIGN DIRECT INVESTMENT At present some of Sri Lanka’s major trading partner countries are the USA, UK, India, Belgium-Luxemburg, Germany, Italy, UAE, Russia, Korea, China Malaysia, Singapore, Japan and France. The volume of trade between Sri Lanka and Canada is not very high at the present moment and there is much untapped potential for expanding trade and promoting investments between the two countries.
Over the years Sri Lanka’s bilateral trade with Canada has registered a significant improvement. The value of trade turn-over between the two countries which stood at C$62.9 million 1986 increased to C$123.0 million in 1996 , C$192 million in 2005 and C$323 million in 2006.Canada is the eleventh largest export market for Sri Lanka and the second largest in the whole of America. Total exports to Canada from Sri Lanka now amounts to C$100 million annually accounting for around 1% of Canada’s total imports. Sri Lanka’s exports to Canada are concentrated on a few products during the last 5 to 10 years, namely garments and apparel products, rubber and rubber products, tea , coconut products, ceramic and porcelain products, coir fibre and footwear.
The garment and apparel products are the major item in Sri Lanka’s exports. On the other hand Canada’s exports to Sri Lanka now stand around C$224 million, the major export item being cereals/pulses accounting for 91% of its total exports to Sri Lanka. There is much scope for diversification of Sri Lanka’s exports to Canada. Canada is the eight largest economy in the world. Given the great potential available in the Canadian market resulting from high economic growth and steady increase in per capita incomes, Sri Lanka needs to launch a vigorous marketing strategy to promote products in respect of which Sri Lanka could be competitive such as gems and jewellery, pure Ceylon DIPLOMACY AND DEVELOPMENT Promoting Sri Lanka as a trade and investment Centre Wijesinghe Jinasena S. KARUNARATNE High Commissioner of Sri Lanka in Canada mai-juin 2007 Diplomat Investissement 17 tea (both black and green), gift tea, selected handicrafts, home décor items, household textiles, organic food products, ready to eat food items, alcoholic beverages, furniture etc.
As regard access to Canada’s market is concerned more than 70% of Sri Lanka’s products are entitled for either duty free entry under the Most Favoured Nation Tariff (MFN) basis or the General Preferential Tariff (GPT) preferential duty. Sri Lanka, however, has not been able to gain much of the benefits as the major proportion (60%) of her exports to Canada consists of garments and apparel products which are not covered under the GPT. It is therefore necessary to develop a marketing strategy to expand the export base in order to avail of the benefits of duty- free access. At the same time Sri Lanka needs to strategize its market approach to improve competitiveness of its apparel products viz a viz other exporting countries. Being the pioneer in South Asia in implementing open economic policies since the late 1970s, Sri Lanka has been able over the years to attract investments from many big global companies. From the year 2002 onwards annual foreign direct investment flows have averaged US$ 200 and they increased to US # 600 during 2006.Leading sources of FDI in Sri Lanka are USA, UK, India, Singapore, Malaysia, Australia, South Korea, Hong Kong, and Japan. Foreign investments are guaranteed by the Constitution of Sri Lanka. The Government has entered into 24 investment protection agreements with foreign governments and is a founding member of the Multilateral Investment Guarantee Agency(MIGA).
There are no legal barriers to remitting of corporate profits and dividends for foreign enterprises doing business in Sri Lanka. Major investors include Chevron, Citibank, Caterpillar, Cargill, Coca cola, Smart Shirts, Mast Industries, Tandon Corporation, Unilever, Nestle, American Tobacco, Mitsui, FDK, Prima, Telekom Malaysia Bhd., Pacific Dunlop/Ansell, Hilton, Emirates, P&O Ports, Bata, Tata, Holcim, Noritake etc Several major investments have made by companies such HSBC, Virtusa, Bank One, Aviva, Valista, WNS, Medigain, Timex etc in Business Process Outsourcing (BPO) projects. India today represents one of the biggest sources of investment for Sri Lanka. A total of 87 Indian companies have already invested an estimated US$ 144 million. In the information and communications technology(ICT) sector international operators such as NTT Japan, Telia AB Sweden, Nortel of Canada, Hutchinson Whampoa UK, Telecom Malaysia, SARC Corporation Netherlands, VSNL, Millicom, Singapore Telecom are planning major investments in their operations in Sri Lanka.
Thre are 23 commercial banks in Sri Lanka of which 12 are foreign-owned. At present the total value of projects by Canadian investors in Sri Lanka including those in the pipeline amount to US$ 363 million approximately. There is much more scope for expanding trade between the two countries as well as Canadian private sector investments in Sri Lanka. Canada is now in the process of looking for new markets with a view to diversification of trade and investment partners. South Asia in one of the emerging regions with a lot of growth momentum to facilitate increased trade and investments. Canadian investors with a growing interest in strengthening and expanding economic activities with India could benefit much from the Indo -Sri Lanka Free Trade Agreement, Sri Lanka- Pakistan .Free Trade Agreement and the E.U.GSP+Scheme.
These preferential trade arrangements enable foreign firms operating in Sri Lanka to gain preferential entry to Indian, Pakistan and European Union Markets. INVESTMENT OPPORTINITIES Sri Lanka is the most liberalised economy in South Asia. It has the most liberal trade and investment regimes in the region and promotes an export oriented growth strategy.The globalization process offers unlimited opportunities and challenges to Sri Lanka.With its outward-looking economic policy and investor-friendly business environment, Sri Lanka offers an excellent opportunity for those who join to develop the economy to earn substantial dividends in the near future. Inspite of the fact that Sri Lanka is confronted with many challenges at the present time, the economy is on a high growth path having registered a commendable growth rate of 7.4% in 2006 and is poised grow above 8% during 2007.Sri Lanka is committed to a mixed economy with the private sector acting as the engine of growth and the Govt. playing the role of a facilitator. The present growth momentum is the result of the continuation of liberal economic policies by successive Sri Lankan Governments that has given sufficient economic freedom and flexibility to the private sector, low barriers to trade and investment, skilled labour force, proximity to strategic sea routes and telecommunication lines and continuous liberalization. The 10-year development now being implemented by the Government of Sri Lanka under the leadership of President Mahinda Rajapakse has accorded high priority to foreign direct investment (FDI) and accordingly the Govt. has set a target of US$ I billion in FDI for 2007,which is approximately four times the levels Sri Lanka has achieved in the last few years.
The Plan envisages a massive investment programme in major infrastructure projects such as power and energy, highways, rail transport, ports, aviation, irrigation, bridges, township development, tourist resorts and water supply schemes. The implementation of these development projects is bound to give a boost to the economic activities in the country. The government expects local and foreign investors to respond to this investment programme. This brings us to the question of why investors should think of Lanka as an attractive and favourable destination for investments. Some of the most salient factors are as follows: WHY INVEST IN SRI LANKA ? Locational Advantage Investment Climate Good Infrastructure Skilled and Literate Human Resources Attractive Fiscal Incentives Preferential Market Access Indo Lanka FTA Sri Lanka Pakistan FTA GSP, Total Foreign Ownership No restrictions on Repatriation of Earnings Safety of Foreign Investments guaranteed by the Constitution Commercial Law is based on British Law.
(*) Wijesinghe Jinasena S. KARUNARATNE, High Commissioner of Sri Lanka in Canada
